By Bhavik Patel
Gold and silver struggled this week on account of strength in US dollar and Treasury yields. The big highlight this week was the rise in crude oil prices which is at 10 month high. This has increased inflationary pressure which means the US Fed will have to keep rates higher or perhaps one more rate hike before the end of 2023. This pushed the US dollar and yields higher leaving both gold and silver in a downward spiral. Traders are awaiting the next big US economic data point for price direction, likely to be next week’s consumer price index report for August, due out on Wednesday, September 13. $1900 is proving to be solid support for gold and whenever any correction around that zone occurs, buyers become active and start defending the levels. Because of strong USD, gold and silver markets are in bearish near-term technical postures, which are keeping the two precious metals markets bulls very timid.
Yesterday the selling pressure got more ammunition as the US labor market remains fairly robust with the number of American workers applying for first-time unemployment claims dropped more than expected last week. The better-than-expected claims data is having an outsized impact on markets as it eases fears of an economic slowdown. Strong labor market indicators may lead the Federal Reserve to stick to its hawkish stance and keep interest rates higher than anticipated. This is what markets don’t want and that is there is strength in USD and Treasury yields. However after the jobs data, Gold and silver both have recovered somewhat indicating profit booking and traders trying to dip their toes and take long positions near support levels.
In MCX, after 4 trading sessions of negative closing, we have seen positive opening today. It is too early to predict that support has been established but there is a flurry of buying activity near the support zone of 59,000 – 58,800. We believe fresh momentum on the downside will commence once MCX gold breaches 58,800 on the downside or COMEX gold breaches key support level of $1900. For next week, we can recommend going long around the support zone of 58,800 for an expected target of 59,400 and stoploss of 58,500. One should keep their positions light as the trend may reverse if gold breaches its level of $1900 in COMEX.
(Bhavik Patel is a commodity and currency analyst at Tradebull Securities. Views expressed are the author’s own. Please consult your financial advisor before investing.)
